Key Stats: Pathbooks on Republic
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Ebooks are the 21st-century innovation for reading. More and more consumers are downloading electronic versions of novels, memoirs, and more. The global ebook market is projected to reach $23.12 billion by 2025, growing at a CAGR of 4.9% for the next five years.
However, e-books are less popular among young readers. After a boom in children’s e-book sales in the early 2010s, children’s books registered the largest decline in e-book sales among all categories in 2017. Only 18% of all young adult book sales were digital in 2017, and even more dramatically, only 5% of children’s books were sold electronically.
The relative unpopularity of e-books among children and young adults is mysterious given how much time young people spend on screens. Children under eight years old spend more than two hours on screened devices per day, and almost half (42%) of those children have their own tablet. Those statistics only increase with the child’s age.
So why aren’t children reading on their devices? Perhaps traditional books converted to electronic form simply aren’t engaging enough to compete with the wide universe of fun digital activities. There may be an opportunity for a new form of book entertainment to take over screens.
Pathbooks is a unique e-book reading app that allows users to change the course of the story with decision points built into the narrative. The app is a 21st century version of the Choose Your Own Adventure series, pairing the convenience of electronic reading with engaging choices within the story.
Pathbooks offers a library of e-book content targeted mainly at children and young adults. Their content includes updated versions of classic stories like “Cinderella” and “The Little Prince” alongside proprietary stories written by Pathbooks’ network of authors. Pathbooks has exclusive writing deals with authors in over 12 countries. The app offers books in both English and Spanish, though the majority of the content is in Spanish (over 80% of the app’s users are from Latin America).
The Pathbooks app is free to download. Users choose from a set of subscription tiers to access e-books, which start at $4.99 per month. There are also in-app purchases available. Some of this revenue is shared with authors, who receive royalties from content written for Pathbooks.
Pathbooks has received over one million downloads across five continents with nothing spent on marketing. However, the company generated only $3,370 in revenue in 2019, with roughly $28,000 in operating expenses. Therefore, the company is functionally pre-revenue.
Pathbooks was founded by Jorge Luis Caballero, who previously worked as an engineer at a television station in Mexico and as a short film director. Caballero is a TEDx speaker. He participated in the Google Launchpad accelerator as the CEO of Pathbooks. Pathbooks’ additional team members include Luis Rodriguez (CTO), Victor Laguna (Programmer), and Mario de los Santos (Content Manager).
Pathbooks plans to leverage this capital raise to attract prominent authors to contribute content for the app as well as win partnerships with major sponsors. The company hopes to attract 40,000 paying subscribers and to generate $2 million in revenue within the next year.
Beyond short-term milestones, Pathbooks is evaluating further technological developments to enhance its core product. The company is exploring offering audio books in addition to written ebooks, which would presumably have similar pick-a-path choice functionality built into them.
Why We Like it
- Traction from Shark Tank Mexico and Meet the Drapers: Pathbooks has been featured on two popular entrepreneurship shows: Shark Tank Mexico and Meet the Drapers. These appearances were undoubtedly the driving factor behind the app’s one million downloads from zero marketing spend, illustrating an interested audience of readers. These appearances also provided validation for the company’s brand, which may be beneficial as the company pitches itself to prominent authors and companies for partnerships.
- Recurring revenue model: Recurring revenue in the form of monthly, quarterly, or annual subscriptions is the entrepreneur’s dream. It makes income much more stable and predictable than one-off purchase income, allowing for more consistent reinvestment into product development, marketing, and more. As Pathbooks continues to add new content to the app, customers will be motivated to maintain their subscription. Those renewals should provide Pathbooks with the capital it needs to grow.
Choose Your Own Adventure-type stories have been popular for decades because consumers are engaged by the ability to customize their content and experience ever-changing stories. The Pathbooks app updates this popular tradition in line with the increased adoption of e-books, allowing children and even adults to discover a new, captivating reading habit. Pathbooks plans to monetize this habit through a stable recurring revenue model, and it has already received one million downloads as a result of appearances on widely-distributed shows.
However, Pathbooks is a very young company with little in the way of proven monetization and retention figures. Though the company was founded in 2018, it generated barely any revenue for more than a year and a half. In addition, Pathbooks is led by an inexperienced founding team with more expertise in software development than entrepreneurship. These factors should cause any prospective investor to carefully consider the risk of an investment in Pathbooks.
If the company is able to successfully monetize its path-picking ebook product, investors could stand to benefit from a variety of exit paths. It’s been more than ten years since Amazon acquired Audible for $300 million, but the market for new methods of integrating reading and the internet is still growing. Large players like Amazon are on the lookout for tech that can make their book services even more attractive to consumers. Struggling incumbents like Barnes & Noble might be interested in acquiring a digital Choose Your Own Adventure-type service to compete with more tech-savvy competitors. Of course, the probability of these acquisitions relies heavily on Pathbooks’ ability to create world-class technology, which in turn relies on the company’s ability to monetize.
Pathbooks has generated an impressive number of organic downloads, and the company is on the threshold of monetization. If Pathbooks succeeds at converting users into paying subscribers, attracting fresh writing talent to contribute content, and refining its pick-your-path ebook technology, investors stand to reap returns. Therefore, Pathbooks is a Deal to Watch.
About: Katy dolan
Katy is a marketing and research consultant to startups (including VC-backed companies, small businesses, and advocacy movements). With experience in tech, venture capital, politics, and non-profits, Katy partners with clients to strategize and execute compelling campaigns focused on user experience and empathetic narrative. Katy graduated cum laude from Harvard College with an AB in Sociology.